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U.S. Job Growth Fades - India Strike Ends

Release Date: 
Friday, April 6, 2012

Gold markets were closed for holidays in the U.S. and Europe, but developments in the U.S. and India today may impact gold when the markets reopen on Monday.

U.S. payrolls increased by only 120,000 in March, far short of the median gain of 205,000 expected by economists in a Bloomberg News survey. The unemployment rate fell by a tenth of a percentage point to 8.2%, due in part to a shrinking labor force resulting from fewer people seeking work. Economists surveyed by Dow Jones Newswires expected a gain of 203,000 in payrolls and the jobless rate to remain at 8.3% for March.

Minutes from the Fed's March 13 policy meeting released this week showed the central bank will hold off on expanding liquidity in the financial system unless growth wanes. The March data reflects a downward move in the positive employment trend seen during recent months. Monthly job growth fell below 200,000 for the first time since November.

The lower job figures may help support gold, particularly if the Fed sees it as a rationale for further monetary easing. "There's going to be this feeling that the Fed's minutes that said easing was off the table is not going to pan out," said Michael Gayed, the chief investment strategist at New York-based Pension Partners LLC, which manages $150 million. "We're getting the consistent message that stimulus is good for gold."

"This is going to turn up the heat on the debate for QE3 since a deceleration in the economic data has been highlighted as a pre-requisite for such a program," said Thomas Simons, money market economist at Jefferies & Co in New York.

Meanwhile, the gold jewelry trade association in India agreed to end a 21 day strike after Finance Minister Pranab Mukherjee pledged to rollback newly implemented gold taxes. "We and all our associated members have decided to call off the strike until May 11 and expect some favorable announcement by the finance minister in Parliament by then," said Bachhraj Bamalwa, chairman of The All India Gems & Jewellery Trade Federation. The Prime Minister "assured that he would consider the demand for the rollback of excise duty favorably," he noted.

(Source: "Gold Prices Gain as U.S. Employers Add Fewer Jobs Than Forecast," Bloomberg, April 6, 2012; "Jewelers in India End Three-Week Strike on Minister Assurance," Bloomberg, April 6, 2012; "Job Growth Loses Steam," Wall Street Journal, April 6, 2012; "Indian Jewelers Call Off Strike," Wall Street Journal, April 6, 2012; "PRECIOUS-Gold headed for weekly loss as US easing hopes fade," Reuters, April 6, 2012; "PRECIOUS-Gold edges up; dull US jobs data revives QE3 talk," Reuters, April 6, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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